Friday, December 13, 2024

The Pro-Democracy Argument for Cutting Government

By Elliott Abrams

Friday, December 13, 2024

 

President-elect Trump’s “government efficiency” team has been busy meeting members of Congress recently, arguing that government has gotten too big and therefore too expensive. It costs too much in tax money, expands the deficit, and imposes regulations that reduce economic growth. That’s all true, but there is a better argument they need to add to their arsenal: We need to reduce the size and power of government if we are to live as freely as previous generations and determine our own fates.

 

Big government is an economic problem, but it is also a democracy problem. The economic problem is the simpler one. Back in 1984, when the federal deficit was a mere $185 billion, Senator Daniel P. Moynihan noted that for every dollar of government spending, the government asks only 78 cents in taxes. Many taxpayers see this as a bargain, he suggested. In 2023, the figures were even more striking: The deficit was $1.7 trillion (nine times greater), and the government was asking only 72 cents in taxes for every dollar it spent.

 

It’s easy to see why (some) taxpayers would consider this a good deal. If the federal debt ($1.572 trillion in 1984, over $33 trillion in 2023) were only inconsequential, why not maintain that formula of getting more while paying less?

 

In the real world, there is already a “crowding out” issue: Interest on that debt is now greater than the defense budget, for example. And there is a generational problem: Today’s beneficiaries of that “bargain” are paying less for more government but devolving the debt on their children and grandchildren. The taxes of future generations will have to pay the growing amounts of interest and cope with whatever impact that has on the economy and on the federal budget.

 

Voters are familiar with this financial issue in their own lives. Everyone knows that you can run up credit card debt, for example, and buy some nice things, but then you have to pay off the card plus the high interest rates. You can stretch to buy a bigger house with a bigger mortgage, but then your 30 years of monthly payments also rise.

 

For most people, anyway. To quote the Pew Research Center:

 

In 2020, the IRS received nearly 5.3 million individual tax returns that showed no AGI and hence no taxable income. . . . Another 60.3 million returns showed AGIs of less than $30,000. The average effective tax rate for those taxpayers was 1.5%, even before refundable tax credits were applied. Millions of Americans actually get money from the IRS, largely due to refundable tax credits.

 

In 2022, 72 million “tax units” (individuals or households)  paid no income tax, according to the Tax Policy Center. Everyone is against bloat, bureaucracy, fraud, and waste, but not everyone pays for it. This is a part of the democracy problem: An awful lot of people are voting for high spending, high deficits, and a growing national debt — but do not pay the taxes that support the spending. On the contrary, they benefit from the spending and are not much affected by tax rates. Eighty-one million people are enrolled in Medicaid, 41 million receive food stamps, and roughly 30 million receive funds from the earned income tax credit. For those households, federal spending may well seem to be a very good deal. And they would, presumably, vote to continue it.

 

And why not? For one thing, the great majority have low incomes and may believe people with higher incomes should pay taxes and support government spending. For another, and this is perhaps the largest democracy problem, who is telling them the deficit and debt are a crisis that must be resolved?

 

Just about no one. There are blue-ribbon committees and fine reports, and there is the bipartisan Committee for a Responsible Federal Budget with its excellent board members. But how often did Joe Biden, Donald Trump, or Kamala Harris campaign on this issue? As of June 2024, the Committee for a Responsible Federal Budget reported, “President Trump approved $8.4 trillion of new ten-year borrowing during his full term in office, or $4.8 trillion excluding the CARES Act and other COVID relief. President Biden, in his first three years and five months in office, approved $4.3 trillion of new ten-year borrowing, or $2.2 trillion excluding the American Rescue Plan. President Trump approved $8.8 trillion of gross new borrowing and $443 billion of deficit reduction during his full presidential term. President Biden has so far approved $6.2 trillion of gross new borrowing and $1.9 trillion of deficit reduction.” In October the committee said that “Vice President Harris’s plan would increase the debt by $3.95 trillion through 2035, while President Trump’s plan would increase the debt by $7.75 trillion.”

 

The federal budget has actually been in balance only for four years since 1969, in fiscal years 1998–2001. Balancing the budget requires cutting spending and raising taxes, both of which will gore someone’s ox. And that someone votes. In particular, budget balancing requires cutting entitlement programs, which have grown fast, and that’s a neuralgic point in American politics.

 

But perhaps more important, budget balancing requires something else: a simple explanation by the president of the United States and congressional leaders that the country cannot go on forever paying 72 cents for every dollar the federal government spends. Even those taxpayers who benefit from this pattern because they receive much more in benefits than they pay in taxes might be persuaded that they are robbing their own children and grandchildren. But they won’t reach that conclusion unless and until someone explains it all, which American politicians seem completely unwilling to do.

 

Until then, most voters will see it the way Moynihan suggested: as a kind of bargain. There has been too much rhetoric in the last few years about the collapse of American democracy and the assault on it. But here, it seems to me, is a real democracy problem: Voters seem to be happy that the U.S. government can print money and run endless deficits to give them benefits they do not have to pay for in taxes. And very rarely is any politician brave enough to tell them that this is pernicious and dangerous and is risking the country’s and their own children’s future security and prosperity.

 

There is another deep democracy problem here: Who is in charge in our society, the government or the people? Daniel Henninger explained in the Wall Street Journal that “the economic programs and priorities of the Biden years were a massive effort by impatient progressive Democrats to implant the idea of government on top forever.” But he is hopeful: “The message sent by lower-income voters who transferred their support to Mr. Trump is that they no longer believe in a way of life defined and led by the public dole — i.e., government.” The new DOGE, or Department of Government Efficiency, Henninger argues, “is a needed reordering of how Americans think about the relationship between government and their own interests.”

 

In the 1788 debate about ratifying the Constitution, Alexander Hamilton said, “Here, Sir, the people govern.” Well, yes — but there are nearly 3 million federal civilian employees, and the Code of Federal Regulations is now more than 240 volumes, or about 200,000 pages. So two cheers for the DOGE guys, who are up against decades of momentum toward placing the government on top — and who face a population used to getting that bargain Moynihan decried, where they get more government than they have to pay for.

 

Two cheers but not three, not yet — because they have not yet begun to explain what they are up to. It isn’t just cutting the old “waste, fraud, and abuse” in federal programs. It isn’t just “saving money” (and besides, saving real money would mean tackling the entitlements Trump has shown little interest in touching). To succeed, it must be an explanation of both the grave fiscal realities we face and of the insidious substitution of government sovereignty for popular sovereignty. This is not an impossible task, but success will require more than speeches by Elon Musk and Vivek Ramaswamy. It will need to be an effort led by the president and the Republican majorities in both houses of Congress. But if this does become a central theme of the Trump presidency, Americans can once again be persuaded of the truth behind Ronald Reagan’s old joke: “I’ve always felt the nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”

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